EPCOR hopes to begin construction this year on natural gas pipeline in southern Bruce

EPCOR Utilities is hoping to begin construction late this year on a natural gas pipeline to service residents and businesses in Arran-Elderslie, Kincardine and Huron-Kinloss.

Steve Stanley, the Edmonton-based company's senior vice-president of commercial services, says EPCOR is aiming to be ready to submit an application to the Ontario Energy Board for leave-to-construct approval, which seeks the go-ahead to build the pipeline, by April or May.

The company has already submitted a franchise agreement application, which seeks the energy regulator's permission to service the southern Bruce County area.

“Assuming that we get the approvals – typically these processes take probably six months – we're hoping to get in the ground for some work in the fall of this year. That's if everything goes as planned,” Stanley said in an interview.

He said the pipeline would be built out over a couple of years.

Two companies – EPCOR and Union Gas – have publicly expressed an interest in expanding natural gas service to the three local municipalities.

In September 2015, EPCOR signed a tentative franchise agreement with the municipalities for the project, which it expects will cost $100 million.

EPCOR had asked the OEB to approve the franchise agreement.

However, the energy regulator recently approved a new framework, following a generic hearing, aimed at helping companies to expand natural gas services into rural, unserviced communities.

The new framework, according to the OEB, indicates that EPCOR will have to file a leave-to-construct application before the energy board will resume its review of EPCOR's franchise application.

The leave-to-construct application will include the rates the company is proposing to charge customers for natural gas, the route for the pipeline and an environmental assessment for the work.

Stanley said EPCOR began the environmental assessment process last summer.

“So we're comfortable that we'll be able to have that completed by that April time frame of this year,” he said.

The new OEB framework allows companies to recover the cost of expansion projects by charging higher distribution rates in communities that are to receive natural gas for the first time.

EPCOR is proposing to set rates for the southern Bruce County communities that are higher than a typical Ontario customer pays for natural gas, but about 10 to 15 per cent lower than the current average cost to heat a home in the region with propane.

The OEB makes a final decision on rates.

“In planning the system and the amount of money that is going to be spent and the revenues we expect, to make it sustainable and economic we have to be in that (range of) 15 per cent below the cost of propane,” Stanley said.

“If it's the exact same price as propane, there is little incentive for people to hook up.”

EPCOR is planning to hold public consultation sessions on their proposed southern Bruce project at the end of February, he said.

Union Gas, meanwhile, has said it is also interested in bringing natural gas to the municipalities, which are part of the company's proposed multi-year gas expansion initiative.

Andrea Stass, a spokesperson for the company, said Union Gas is “continuing to investigate options that might result in an economically feasible proposal for southern Bruce County.

“But, at this point, we have not concluded that investigation,” she said.

The OEB says after a natural gas company applies for a leave to construct a new pipeline, the board will publish a notice and any company interested in presenting its own proposal can intervene and do so.

If more than one proponent applies for a project, the energy regulator says it will determine which one will receive the approval “based on a review of the proposal including proposed rates.”

Stanley said EPCOR is confident the OEB will approve its expansion plan.

“I think what we find very positive is we went through a competitive process with the municipalities to start with and so there was a number of groups that applied for that and it was the southern Bruce communities that actually selected our proposal,” he said.

“We've kind of gone through this process once – not at the OEB but at the municipal level – and we feel confident that we'll be able to show value and do that to the Ontario Energy Board also.”

The mayors of Arran-Elderslie, Kincardine and Huron-Kinloss have said they will continue working with EPCOR to bring natural gas to their municipalities “as soon as possible.”

They also say they will advocate for some of the $230 million that the provincial government has earmarked to assist with natural gas expansion and conversion costs.

A 2015 report said making natural gas available in the three local municipalities would save consumers there up to $27 million per year once the new utility is up and running.

Under the old OEB framework for expanding natural gas services, utilities were only allowed to expand in areas where the incremental revenues that would be generated from the expansion would, over time, cover the expansion costs. If the revenues would not cover the costs, an up-front payment would be required from the potential new customers. Utilities were not allowed to charge customers in a potential expansion community a higher rate than existing customers in the same rate classification.

The OEB rejected Union Gas's request to allow utility companies to charge existing customers a subsidy to help them expand into unserviced areas, saying the measure would "distort the market to the detriment" of new gas distributors that do not have an existing customer base as well as companies that provide energy services that compete with gas, such as propane.